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Japan: Industrial production contracts at fastest pace since Tohoku earthquake

October 30, 2012

In September, industrial production plunged 4.1% over the previous month in seasonally adjusted terms, following the 1.6% contraction observed in August. Moreover, the reading exceeded the 3.1% drop expected by the market and represented, in fact, the largest fall since March 2011, when the devastating Tohoku earthquake hit the country. On an annual basis, industrial production declined 8.1% in September, after contracting 4.6% in August. According to the Ministry of Economy, Trade and Industry, the sectors that mainly contributed to the monthly deterioration were transport equipment, general machinery as well as iron and steel. As a result of the monthly drop, the government revised down its assessment on Japan's industrial production for the second month in a row, stating that "output is on a downward trend." The Survey of Production Forecast showed that manufacturers are becoming more pessimistic and now see industrial output falling 1.5% month-on-month in October, which is down from the flat reading expected in the previous month's survey. However, manufacturers forecast a 1.6% rise in November. As a result, the trend is now pointing downwards, with annual average growth in industrial production falling from 1.3% in August to 0.8% in September.